September, 2022
Thinking of putting your home under the hammer? Selling your house at auction could help you shift it quickly. Let’s take a look at how auctions work, the pros and cons, and if it could be right for you.
Thought house auctions were only for canny investors and property developers? Not necessarily! Auctions can appeal to all sorts of buyers and sellers.
Auctions are a quick and secure way of selling your home. And there are benefits for sellers and buyers alike.
But if you want to sell your house at auction, it’s important to get to grips with all the details before you jump in.
Here’s the lowdown on the auction process, the pros and cons of going down the auction route, and more.
Selling your place at auction could appeal if you’re after a quick and secure exit.
Once the hammer (or gavel) falls, the winning bidder is committed to buying your house. The clock starts ticking to tie everything up.
If your home has issues that might put buyers off, auction could be the way to go. Some buyers will be put off by problems in the traditional sales process.
Auctions often attract buyers looking for ‘doer-uppers’ or unusual properties. These buyers are looking for homes that can gain value in the future.
You may also find the price gets driven up in the heat of the moment. But this is by no means certain.
The main benefits of selling a house at auction are:
it's fast and the sale can be done and dusted within a couple of months
it's a secure way of selling a home, particularly with a traditional auction
it attracts serious buyers, cash-in-hand investors and open-minded developers
it can get you a higher price if your property’s been marketed well and you've got more than one interested buyer
The drawbacks of selling your home at auction are:
it’s uncertain and there’s no guarantee your property will sell
you might not get the price you hoped for
you need to be super organised and get things moving as soon as the auction is done.
You'll usually pay about 2.5% of your sale price to the auctioneer, although it depends on who you use.
You may also have to pay for advertising, even if the property isn’t sold.
But some auction houses operate on a ‘no sale, no fee’ basis.
You’ll also need to pay for a solicitor or conveyancer (a specialist property lawyer). They'll need to oversee the legal side of selling your home.
The traditional method tends to be more well-known than the modern method.
The auction is usually held in an auction house, but they can be online. All the bidding action happens in the space of a few minutes.
If your property sells, you’ll exchange contracts immediately after the auction. The winning bidder will put down a deposit – usually 10% – straight away.
You then have 28 days to complete, so everything’s wrapped up within a month.
If the buyer backs out after you've exchanged contracts, you’ll get to keep their 10% deposit.
The traditional auction method is quicker than the modern auction method. Plus, it's very hard for buyers to back out.
You’re more likely to get cash-in-hand buyers at a traditional auction as they’re harder to get a mortgage for.
In auction terms, the modern method is the new kid on the block.
It gives the buyer a little more time and flexibility. This makes it a good choice to reach as many potential buyers as possible.
A modern auction is usually held online, so think of it like bidding on an e-Bay auction.
Once there are enough people ‘watching’ the property online, the auction house sets a countdown timer. That's when the bids start coming in.
They’ll put down a non-refundable reservation fee to secure it, which is on top of the purchase price.
You then have 56 days in total to complete the sale.
28 of those days are for exchanging contracts and getting the deposit from the buyer. Then you complete within the next 28 days.
Let’s run through the steps of preparing your house for sale at auction as well as the auction process.
Bear in mind the process differs between traditional and modern auctions. We’ve highlighted where things change depending on the type of auction.
1. Pick an company that specialises in auctions
The first step is to find an auction house or an estate agent that specialises in auctions.
You want to work with someone who knows how to market a home for auction. They should get as many people interested as possible.
They can explain the process to you and help you set a reserve price. They should let their database of buyers know about your property.
2. Hire a conveyancer or solicitor
You’ll need a conveyancer or solicitor to do the legal legwork.
Unlike a conventional sale, a lot of legal work is done upfront (before a deal is agreed).
They’ll pull together all the paperwork associated with selling your home.
This is often known as a legal pack and is typically available for buyers to look at before the auction.
Your conveyancer will help you check any debts secured against the property. They'll ask you to dig out any surveys and valuations you've had recently.
They'll also draft a contract so it's ready for the buyer.
3. Prepare your home for auction
Get your home ready for photographs and auctions.
You could use a professional home stager, or you can do it yourself with some quick updates.
Check out how to stage your home here.
4. Set a guide price and reserve price
You’ll need to fix a guide price and a reserve price, which are not the same.
The guide price is what buyers will see on your property listing. It gives them an idea of what the property is worth. With any luck, your pad will sell for more than the guide price.
The reserve price is the lowest price you are willing to accept for your place. This may be kept secret, between you, your estate agent and the auctioneer.
If offers are lower than the reserve price, the auctioneer will withdraw your property.
5. Market your pad
The estate agent and auction house will market your house for about a month.
If you're going with the traditional method, the auction will then take place. If it’s a modern auction, the sale process can then last up to another month.
Make sure your estate agent’s marketing your home well in advance. You want it to appear in auction catalogues and communications from agent.
You’ll also need to open up your home to viewings so buyers can check it out. They might bring along an architect or builder to see what they could do with it.
6. Keep tabs on the auction and bids
At auction time, interested buyers will submit bids, and the one who bids highest will be your buyer.
If it’s a modern auction, this process can last days, weeks or a month. Your estate agent should keep you in the loop throughout the auction. They should let you know about any offers or newly interested buyers.
If it’s a traditional auction, it'll all be over in minutes. If it's held in person, you’ll need to decide if you want to be there for the bidding.
7. Get the sale over the line
How the sale gets over the line depends on the type of auction.
If it's a traditional auction, the deal is already binding. You exchange contracts on the day.
With a modern auction, you’ve got 28 days to exchange contracts.
If a buyer pulls out in that time, they'll lose their reservation fee. They'll also have to pay hefty administration fees.
And last but not least, you’ll complete. This is when ownership officially changes hands.
For both types of auction, it happens within 28 days of the contract exchange.
If you are interested to know what your property is worth, please click here to book a market appraisal.
